KUALA LUMPUR, May 4 — Malaysia’s manufacturing sector recorded its strongest performance in four years this April, but economists warn the surge is largely driven by businesses...
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— AFP pic! Plus, enjoy an additional FREE RM10 when you sign up using code VERSAMM10 with a min. cash-in of RM100 today. T&Cs apply. KUALA LUMPUR, May 4 — Malaysia’s manufacturing sector recorded its strongest performance in four years this April, but economists warn the surge is largely driven by businesses frantically stockpiling goods to shield themselves from the fallout of the ongoing war in the Middle East.
The seasonally adjusted S&P Global Malaysia Manufacturing Purchasing Managers’ Index jumped to 51.6 in April, up from 50.7 in March. This marks the second consecutive month the index has stayed above the neutral 50.0 threshold, signalling an overall improvement in the sector’s health. Output growth was the fastest seen since December 2021.
However, S&P Global noted that this upturn was not entirely due to organic demand. Instead, manufacturers and their clients are engaging in “safety-stock building”, buying in bulk to pre-empt anticipated material shortages and price hikes linked to the Middle East conflict. This rush to stockpile comes at a steep cost to consumers and businesses alike.
The pace of input cost inflation hit a 45-month high due to surging energy and raw material prices, which manufacturers passed onto consumers, pushing selling prices to a record high in the survey’s history. The war has also severely disrupted global logistics, resulting in the most pronounced lengthening of supplier delivery times in nearly four years. While domestic new orders grew as local clients bought in bulk, international demand took a hit.
New export orders eased for a second straight month, as the geopolitical crisis weakened appetite from foreign buyers. To cope with the sudden rush of production requirements, Malaysian factories boosted hiring, marking the most significant rate of job creation so far this year. Despite the extra hands, backlogs of work still rose marginally due to material shortages. Despite the spike in production and hiring, business confidence remains fragile.
Optimism among manufacturers plunged to an eight-month low, dampened by the unpredictable trajectory of the Middle East crisis. Maryam Baluch, an economist at S&P Global Market Intelligence, said the latest data clearly reveals how the war is impacting local factories.
“Stockpiling efforts drove a stronger rise in production, which was in part directed towards building holdings of finished goods. Firms also reported that their clients had a similar rationale, and as a result, April saw renewed growth in new orders,” she explained.
“The sector’s performance in the coming months will be partly shaped by how the situation in the Middle East unfolds, but the latest data already highlights steps manufacturers are taking to mitigate some of the impacts. ”
Malaysia Manufacturing Purchasing Managers' Index Middle East Conflict Supply Chain Delays Maryam Baluch
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